Weekly Commentary (6/10/24) – Markets Finish Higher on the Week

Equity markets finished higher last week as investors continued to bid up stocks.  

For the week, the DJIA gained 0.29% while the S&P 500 closed near record highs and added 1.32%.  The tech-heavy Nasdaq finished ahead by 2.38%. For the week, the MSCI EAFE Index tacked-on 0.56% while emerging market equities (MSCI EM) finished up 2.30%.  Small company stocks, represented by the Russell 2000, were the lone laggards as the index closed lower by 2.10%. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished higher 0.44% for the week as yields moved low.  As a result, the 10 YR US Treasury closed at a yield of 4.43% (down 8bps from the previous week’s closing yield of ~4.51%) as investors await the Fed’s decision on interest rates. Gold prices closed at $2,305.20/oz – down 0.8%.  Oil prices moved lower by 1.90% to close at $75.53 per barrel.             

Economic news released last week confirmed a resilient labor market and economic backdrop.  The May Employment Report was better-than-expected for both job creation and wage gains.  The strong report has market participants not expecting a rate cut this month and odds of a rate cut in in September now at 54%.  The Atlanta Fed GDPNow model has 2Q’24 GDP at 3.1%. 

The big news in the week ahead centers on the Fed’s upcoming FOMC meeting on Tuesday and Wednesday.  Chairman Powell and the Fed will most likely keep rates steady (pause) with a caveat that they will remain data dependent.  Markets seem to think (wish) that the Fed will hint at an upcoming rate cut, but the Fed will likely keep investors and markets on edge with the usual say nothing Fed-speak.  Other important economic news in the week ahead includes the release of the CPI, PPI, Retail Sales, Consumer Sentiment, and Industrial Production.  The CPI and PPI reports will give investors and the Fed a clue as to inflation’s direction.  

Market activity is broadening out a bit (not just big tech) … a good sign. Remember, market valuations reflect a lot of good news.  Perhaps the economy will hit a soft patch over the next few months, but underlying economic activity remains reasonable.  Diversification, patience and a bias towards quality will help investors manage through the usually slow summer period.  

Enjoy the week.